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RIFCO Reports $165K First Quarter Profit

RED DEER, AB, Aug. 19 /CNW/ - RIFCO Inc. (TSXV: RFC) is pleased to
announce its financial results for the first quarter ending June 30, 2009.
Net income for the quarter of $164,650, represents a reduction from the
$607,346 reported in Q1 of the prior year.
This quarter's results brings the trailing 12 months EPS to $0.06 and Net
Income to nearly $1M. Shareholders' equity is now $8.70M. Loan originations in
the first quarter decreased to $7.14M from $9.52M of the prior year, a
decrease of 25%. Managed finance receivables grew to $52.37M from $35.27M in
the prior year, a 48.5% growth rate.
Management is pleased to report that RIFCO is on track for its fourth
consecutive profitable year.
Efficiency improvement is noteworthy. As the Company continues to enjoy
benefits of increasing scale, progress is witnessed in improving efficiency
ratios. In Q1, the operating expense ratio improved to an all time quarterly
low of 5.02%. Annual operating expense ratios for 2009, 2008, 2007, 2006, and
2005 were 6.14%, 9.49%, 12.12%, 18.13% and 22.25% respectively.
In this quarter the Company experienced the highest securitization
pricing in the Company's history. RIFCO's strong operational results and
Canada's historically low benchmark interest rates are not being reflected in
RIFCO's current cost of funds. RIFCO's funding solutions are a $7.5M senior
debt facility from BMO Bank of Montreal and a securitization facility. This
securitization facility was renewed on July 30th for a new $30M expiring on
July 30, 2010. This renewal will provide sufficient funding capacity for RIFCO
to repeat the prior year's loan origination level.
RIFCO remains steadfast in originating only loans that it believes can
achieve acceptable profit margins. As margins are affected by funding rates
and by expected credit performance, RIFCO adjusts targeted origination levels,
credit requirements, and lending rates while maintaining market continuity.
Prior to this quarter, and in anticipation of the increased funding costs,
RIFCO lending rates have again been increased in order to maintain gross
margin. Lending rates are now at a level that is significantly restricting new
originations. The Company witnessed a 26% reduction in processed applications,
a reduced loan closing ratio, and a reduction in loan originations.
As the Canadian economy weakens, and as unemployment levels rise, RIFCO's
credit performance remains within its stated target. The Company is reporting
an average loan loss rate of 5.36%. This ratio is below the Company's target
loss rate range of 5.5-6.5%. Delinquent loans are now at 5.58% of managed
assets. While operating within this challenging environment, RIFCO has
continued diligent efforts in both the credit adjudication and payment
collections functions in order to maintain targeted credit results.
As previously reported, there has been a reduction in the number of auto
lending competitors in Canada. RIFCO has been able to incrementally improve
its risk adjusted loan pricing. The marketplace continues to have multiple
players, and RIFCO's pricing changes do impact its loan volumes, closing
rates, credit quality, and efficiency. The Company continues to carefully
monitor interest spreads in order to optimize profitability and company
liquidity. Improved capacity or pricing for RIFCO's funding solutions will
positively affect future revenue and profitability.
Highlights:
- Net Income in Q1 decreased to $165K from net profit of $607K (YOY)
- Revenue in Q1 decreased to $2.88M from $3.77M (YOY)
- Managed Loans increased 48.5% to $52.37M (YOY)
- Loan Originations in Q1 reduced 25% to $7.14M (YOY)
- Loans Securitized decreased to $7.52M from $10.71M (YOY)
- Q1 - EPS was $0.01 down from $0.03 (YOY)
- Book value per share has increased to $0.45 from $0.40 (YOY)
- Operating Expense Ratio reduced by 2.43% to 5.02% (YOY)
- Funding Costs increased to 7.37% from 6.56% (YOY)
- Average Cost of Borrowing increased to 7.95% from 7.64% (YOY)
- Delinquency Ratio increased by 1.63% to 5.58% (YOY)
- Average Loan Loss Rate increased from 4.54% to 5.36% (YOY)
- Managed Loans up 3.6% over the prior quarter
- Loan Originations down 9.7% over the prior quarter
- Operating Expense Ratio reduced to 5.02% from 5.42% in the prior
quarter
- Delinquency Ratio increased to 5.58% from 5.04% in the prior quarter
- Average Loan Loss Rate increased to 5.36% from 5.12% in the prior
quarter
As is RIFCO's custom, please note the Q1 progress report against RIFCO's
specific objectives for 2010 as published in the 2009 annual report to the
shareholders.
1. Maintain loan originations of over $40 million
Loan originations in the first quarter were $7.14M.
2. Grow managed assets by 40% to over $70 million
Managed financed receivables in the first quarter grew to $52.37M.
3. Maintain revenue of over $12 million
Revenue in the first quarter reached $2.88M.
4. Achieve managed finance receivables annualized write offs between 5.5%
and 6.5%
Year-to-date average loss rate currently stands at 5.36%.
RIFCO continues to believe that this is an attractive time in the
economic cycle to originate new non-traditional auto loans.
RIFCO's current access to capital restrictions is impairing its ability
to leverage its valuable loan origination platform. Achieving access to stable
and reasonably priced low cost lending capital continues to be a paramount
objective for RIFCO. Management continues to communicate with current and
potential funding providers toward increasing and improving its access to this
capital.
About RIFCO
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RIFCO is one of Canada's fastest growing automotive finance companies.
Non-traditional auto loans are indirectly originated through a growing network
of selected new and used vehicle dealers operating in all provinces except
Saskatchewan and Quebec.
The common shares of RIFCO INC. are traded on the TSX Venture Exchange
under the symbol "RFC". There are 19.23 million shares (basic) outstanding and
20.98 million (fully diluted) shares.
Neither TSX Venture Exchange nor its Regulation Services Provider accepts
responsibility for the adequacy or accuracy of this release.